REG - Ergomed plc - Preliminary Results <Origin Href="QuoteRef">ERGO.L</Origin> - Part 1

ErgomedAnnouncement

12/04/2016 07:06

RNS Number : 8638U
Ergomed plc
12 April 2016
Ergomed plc
Unaudited Preliminary Results for the year ended 31 December 2015
Strong financial performance coupled with an extensive backlog 
London, UK - 12 April 2016: Ergomed plc, ('Ergomed', AIM: ERGO) a profitable UK-based group dedicated to the provision of specialised services to the pharmaceutical industry and the development of new drugs, today announces its Preliminary Results for the year ended 31 December 2015.
Commenting on the results, Miroslav Reljanovic MD, Chief Executive Officer of Ergomed plc, said: 
"In our first full year as a public company we have delivered a very strong financial performance with top-line and adjusted EBITDA growth of 43% and 39% respectively. Our backlog is extremely healthy, with over 85% of 2016 budgeted revenue contracted by the beginning of the year. We continue to look for acquisitions that complement our existing service offerings, adding one during the year. Our co-development businesscontinues to gain traction with another programme added in 2015 and important data expected from two of our five co-development partners during 2016."
Financial Highlights: Performance in-line with market expectations
 Revenues up 43% to 30.2million (2014: 21.2m)
o Pro forma adjusted for PrimeVigilance1, revenues up 27% (2014: 23.7m)
 Gross profit up 45% to 8.4 million (2014: 5.8m)
 EBITDA (adjusted) up 39% to 3.4 million (2014: 2.4m) (note 8)
o Pro forma adjusted for PrimeVigilance1, EBITDA (adjusted) up 22% (2014: 2.8m)
 Cash and cash equivalents of 4.0 million as at 31 December 2015 (2014: 4.6m) with zero debt
 New contracts worth an initial value of 28 million won in 2015
 Strong backlog of 59 million with more than 85% of planned 2016 revenue already contracted as of 1 January 2016
1 PrimeVigilance acquisition completed on 15 July, 2014; Pro forma figures assume contribution for full year 2014 to enable comparison with 2015
Operational Highlights: Expanding geographical footprint and service offerings
 Signed first orphan disease co-development agreement with Dilaforette for Phase II clinical development of sevuparin in patients with Sickle-Cell Disease (SCD) experiencing an acute vaso-occlusive crisis (VOC) 
 Expanded presence in Asia with the opening of an office in Taipei (Taiwan) as a regional hub
 Acquired Sound Opinion, one of the UK's leading medical information service providers, which was immediately integrated into PrimeVigilance, Ergomed' s fast growing post-marketing business
 Strengthened management team with appointment of Andrew Mackie as Chief Business Officer and to the Board
Post-year-end highlights
 Management team further enhanced with the appointment of Stephen Stamp to the Board as Chief Financial Officer; Neil Clark promoted to Chief Executive Officer of PrimeVigilance
In addition, the Company announces the appointment of Numis Securities Ltd as joint broker to the Company with immediate effect.
Enquiries:
FTI Consulting
Tel: +44 (0) 20 3727 1000
Simon Conway / Mo Noonan / Natalie Garland-Collins



Stifel Nicolaus Europe Limited
Tel: +44 (0) 20 7710 7600
(Nominated Adviser and Joint Broker)
Jonathan Senior / Stewart Wallace



Numis
Tel: +44 (0) 20 7260 1000
(Joint Broker)
Michael Meade / James Black

About Ergomed
Ergomed plc is a profitable UK-based business providing drug development services to the pharmaceutical industry and has a growing portfolio of co-development partnerships. It operates in over 50 countries. 
Ergomed provides clinical development, trial management and pharmacovigilance services to over 80 clients ranging from top 10 pharmaceutical companies to small and mid-sized drug development companies. Ergomed successfully manages clinical development from Phase I through to late phase programmes.
Ergomed has a wide therapeutic focus, with a particular expertise in oncology, neurology and immunology and the development of orphan drugs. Ergomed believes its approach to clinical trials is differentiated from that of other providers by its innovative Study Site Management model and the use of Study Physician Teams, resulting in a close relationship between Ergomed and the physicians involved in clinical trials.
As well as providing high quality clinical development services, Ergomed is building a portfolio of co-development partnerships with pharma and biotech companies which share the risks and rewards of drug development. Ergomed leverages its expertise and services in return for carried interest in the drugs under development. For further information, visit: http://ergomedplc.com
Forward Looking Statements
Certain statements contained within the announcement are forward looking statements and are based on current expectations, estimates and projections about the potential returns of Ergomed plc ("Ergomed") and industry and markets in which Ergomed operates, the Directors' beliefs and assumptions made by the Directors. Words such as "expects", "anticipates", "should", "intends", "plans", "believes", "seeks", "estimates", "projects", "pipeline" and variations of such words and similar expressions are intended to identify such forward looking statements and expectations. These statements are not guarantees of future performance or the ability to identify and consummate investments and involve certain risks, uncertainties, outcomes of negotiations and due diligence and assumptions that are difficult to predict, qualify or quantify. Therefore, actual outcomes and results may differ materially from what is expressed in such forward looking statements or expectations. Among the factors that could cause actual results to differ materially are: the general economic climate, competition, interest rate levels, loss of key personnel, the result of legal and commercial due diligence, the availability of financing on acceptable terms and changes in the legal or regulatory environment.
These forward-looking statements speak only as of the date of this announcement. Ergomed expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Ergomed's expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.
Chief Executive Officer's Review
The Board of Ergomed are delighted to report that in its first full year post-IPO the Company has achieved its targets in terms of revenue and adjusted EBITDA growth. We continue to see good customer traction with contracts with an initial value of 28 million won in 2015 and the Company is poised for another excellent year in 2016. 
CRO and post marketing services - another year of solid growth
The 2015 contract wins included several multi-million pound, full service Phase II and Phase III programmes and the provision of full service pharmacovigilance and medical information services to late stage biotech and pharma companies. The majority of these contracts are already in process and are scheduled to be completed over the next few years. Ergomed ended 2015 with a total backlog of contracted work with a value to be invoiced in future years of approximately 59 million. Backlog total is the revenue forecast to be generated in the future from all current signed contracts. More than 85% of 2016 budgeted revenues had been contracted as of 1 January 2016.
In May 2015, we announced the acquisition of Sound Opinion, a UK based medical information service provider. Having traded profitably for over 18 years, Sound Opinionprovides high quality outsourced medical information services to branded and generic pharmaceutical companies marketing medicines in the UK and Ireland. Following its acquisition, Sound Opinion has been successfully integrated into PrimeVigilance creating a multi-lingual medical information business.
Global demand for quality drug development services remains strong and Ergomed continues to benefit from this trend. Ergomed has significant experience of working with biotech and pharmaceutical companies and has a track record of being able to tailor its full service capability to meet clients' particular requirements. 
Co-development - another partnership added to the portfolio
Ergomed is also in the unique position of offering co-development partnerships and is committed to building its portfolio of co-development assets and delivering significant clinical data thereby creating shareholder value in the next few years.
In February 2015 we signed a co-development agreement with Dilaforette for a sickle cell disease treatment bringing the total number of partnerships in the Company's co-development portfolio to six. Under these agreements Ergomed is contributing to the cost of the clinical trials and in return will receive a share of any proceeds generated from the commercialisation of the partnered drug asset or, in the case of Dilaforette, an equity interest in the sponsor company. 
Two of our six programmes are expected to deliver important results in 2016. 
The status of Ergomed's current partnerships is summarised below:
Company
Collaboration
Update
CEL-SCI 
(NYSE MKT: CVM)
www.cel-sci.com
 Phase III study in head and neck cancer
 Multikine
 880 patients
 105 clinical sites in 24 countries
 756 patients enrolled, as announced by partner on 1 April 2016
CEL-SCI 
(NYSE MKT: CVM)
www.cel-sci.com
 Phase I peri-anal warts in HIV/HPV
 Multikine
 15 patients
 2 clinical sites
 Proceeding to plan. Partner has not announced recruitment numbers
Aeterna Zentaris
(NASDAQ: AEZS; TSX: AEZ)
www.aezsinc.com
 Phase III Zoptrex pivotal study in endometrial cancer 
 Zoptarelin doxorubicin
 500 patients
 115 clinical sites in 22 countries
 Fully recruited ahead of schedule
 PIII continuation recommended by Data and Safety Monitoring Board (DSMB)
 Results expected 2H 2016
Ferrer
Private
www.ferrer.com
 Phase IIa study in insomnia
 Lorediplon
 130 patients
 11 clinical sites in 3 countries
 The companies announced more than 45 patients randomized in January 2016
 Results expected in 2H 2016
Dilaforette
Part of Karolinksa Development AB 
(STO: KDEV)
www.dilaforette.se
 Phase II in vaso-occlusive crisis in patients with sickle cell disease
 Orphan drug indication
 Sevuparin
 Up to 154 patients
 11 clinical sites in 5 countries
 Results TBC
Synta Pharmaceuticals
(NASDAQ: SNTA)
www.syntapharma.com
 Phase II study in non-small cell lung cancer (NSCLC) 
 Phase III study terminated as the DSMB indicated that the study would not reach a positive conclusion
 At that time, the investigator initiated trials were ongoing and these will continue as planned
 If positive, Synta will evaluate next steps
 Ergomed carried interest remains, but no further investment is being made by Ergomed in any trials
Outlook
The backlog of services contracts means Ergomed is again well positioned to deliver its revenue targets for 2016. Ergomed continues to seek focused acquisition opportunities to build the services business. 
Our co-development business continues to gain traction as we seek out partnership opportunities to build a diverse pipeline of development projects. Ergomed anticipates important news from its co-development partners in 2016 including Phase IIa data on lorediplon (Ferrer) and Phase III data on Zoptrex (Aeterna Zentaris).
Miroslav Reljanovic M.D. - Chief Executive Officer
Financial Review
Key Performance Indicators
The Directors consider the principal financial performance indicators of the Group to be:
m
2015
2014
Revenue
30.2
21.2
Gross profit
8.4
5.8
Operating profit
EBITDA (adjusted) (note 8)
2.1
3.4
0.8
2.4
Cash and cash equivalents
4.0
4.6
The Directors consider the principal non-financial performance indicators of the Group to be:
 The expansion of the co-development portfolio with the addition of two new partnerships per year
 The development or acquisition of new and/or the expansion of existing service offerings
 The delivery of high quality services that continue to meet the highest industry standards as evidenced by internal and external quality audits 
Condensed Consolidated Statement of Comprehensive Income
Revenue for the year ended 31 December 2015 was 30.2 million (2014: 21.2 million), an increase of 43%.
Gross profit was 8.4 million and gross margin was 28% (2014: gross profit 5.8 million and gross profit margin 27%). Ergomed's gross margin fluctuates compared to a traditional clinical research organisation (CRO) service provider as Ergomed operates a hybrid model working with customers on a normal full priced basis as well as working with co-development partners where Ergomed is carrying out clinical studies at reduced fees in return for carried interests in the partnered product. The mix of full service work to co-development work in any given period therefore impacts the gross profit and gross margin in that period.
Administration expenses were 5.2 million (2014: 3.7 million), an increase of 41%. Operating profit for the year was 2.1 million (2014: 0.8 million), an increase of 166%, reflecting the added contribution of PrimeVigilance Limited, which was acquired in July 2014 and Sound Opinion Limited which was acquired in May 2015, to the performance of the Group for 2015.
Condensed Consolidated Balance Sheet
As at 31 December 2015 total assets less total liabilities amounted to 16.9 million (2014: 15.3 million) including cash and cash equivalents of 4.0 million (2014: 4.6 million).
The principal movements in the Condensed Consolidated Balance Sheet during the year were:
 Acquisition of Sound Opinion in May 2015 and the associated acquisition of goodwill, intangible and other assets
 Increase in trade and other receivables by 2.9 million, reflecting a change in terms of trade with a co-development partner
 Increase in trade and other payables of 1.0 million, reflecting increased trading levels.
Condensed Consolidated Cash Flow Statement
Ergomed Group has been profitable and cash generative since inception. At present, the Group does not have any borrowings or long term debt apart from a few immaterial fixed asset finance leases.
The principal cash inflows from operating activities in the year were 0.3 million (2014: 0.5 million).
The Group also paid taxation of 0.6 million in 2015 (2014: 0.4 million).
Financial Outlook
Ergomed's Board has set the objective of remaining profitable and cash generative. This is being achieved by running profitable healthcare services businesses alongside a managed portfolio of drug co-development partnerships where Ergomed contributes services at reduced prices in return for a carried interest in the potential commercial returns that may be generated in the future if the clinical studies are successful.
Ergomed currently had a strong contracted backlog of about 59 million at 1 January 2016 with more than 85% of planned 2016 revenue already contracted as of that date. The overall trading environment for full service business is generally strong although still very competitive. Ergomed's Board believes it can continue to generate further growth and profits from both the Ergomed and PrimeVigilance businesses in 2016 and beyond whilst at the same time expanding the co-development portfolio on a selected basis.
Going concern
As at 31 December 2015 the Group had 4.0 million in cash or cash equivalents and a strong backlog of signed contracts. The Directors therefore expect Ergomed's services business to remain both profitable and cash generative. Taking into account existing cash resources and, after due consideration of cash flow forecasts, the Directors are of the view that Ergomed will continue to have access to adequate resources to allow the Group to continue trading on normal terms of business for no less than 12 months from the date of signing of the financial statements and have therefore prepared the financial statements on a going concern basis.
UNAUDITED PRELIMINARY RESULTS 
Condensed Consolidated Income Statement

Notes
2015
000s
2014
000s




REVENUE

30,178
21,155




Cost of sales

(21,808)
(15,385)


Gross profit

8,370
5,770




Administrative expenses

(5,186)
(3,677)
Other operating income

81
54
Amortisation of acquired revalued intangible assets

(596)
(446)
Share-based payment charge

(288)
(338)
Exceptional items
3
(309)
(584)


OPERATING PROFIT

2,072
779




Investment revenues

1
-
Finance costs

(1)
(2)


PROFIT BEFORE TAXATION

2,072
777




Taxation

(520)
(199)


PROFIT FOR THE YEAR

1,552
578


EARNINGS PER SHARE



Basic 
5
5.4p 
2.4p 


Diluted 
5
5.2p
2.3p


All activities in the current and prior period relate to continuing operations.
Condensed Consolidated Statement of Comprehensive Income


2015
000s
2014
000s




Profit for the year

1,552
578


Items that may be classified subsequently to profit or loss:



Exchange differences on translation of foreign operations

(244)
(212)


Other comprehensive income for the period net of tax

(244)
(212)


Total comprehensive income for the period

1,308
366


Condensed Consolidated Balance Sheet

2015
000s
2014
000s




Non-current assets



Goodwill

7,488
7,282
Other intangible assets

2,819
2,927
Property, plant and equipment

335
185
Investments

183
39 
Deferred tax asset

365
323 




11,190
10,756


Current assets



Trade and other receivables

9,528
6,343
Cash and cash equivalents

3,974
4,576




13,502
10,919


Total assets

24,692
21,675


Current liabilities



Borrowings

(5)
(7)
Trade and other payables

(5,955)
(5,010)
Deferred revenue

(795)
(594)
Current tax liability

(478)
(144)


Total current liabilities

(7,233)
(5,755)


Net current assets

6,269
5,164


Non-current liabilities



Borrowings

(7)
(6)
Deferred tax liability

(516)
(575)


Total liabilities

(7,756)
(6,336)


Net assets

16,936
15,339


Equity 



Share capital

288
288
Share premium account

12,342
12,342
Share-based payment reserve

650
362
Translation reserve

(537)
(293)
Retained earnings

4,193
2,640


Total equity

16,936
15,339


Consolidated Statement of Changes in Equity

Share
capital
000s
Share
Premium account
000s
Share-based
Payment
reserve
000s
Translation
reserve
000s
Retained
earnings
000s
Total
000s
Balance at 31 December 2013
200
-
24
(81)
1,764
1,907
Profit for the year
-
-
-
-
578
578
Other comprehensive income for the year
-
-
-
(212)
-
(212)

Total comprehensive income for the period
-
-
-
(212)
578
366
Share issues during the year (net of expenses)
88
12,342
-
-
-
12,430
Share-based payment charge for the year
-
-
338
-
-
338
Deferred tax credit taken directly to equity
-
-
-
-
298
298

Balance at 31 December 2014
288
12,342
362
(293)
2,640
15,339
Profit for the year
-
-
-
-
1,552
1,552
Other comprehensive income for the year
-
-
-
(244)
-
(244)

Total comprehensive income for the year
-
-
-
(244)
1,552
1,308
Share-based payment charge for the year
-
-
288
-
-
288
Deferred tax credit taken directly to equity
-
-
-
-
1
1

Balance at 31 December 2015
288
12,342
650
(537)
4,193
16,936

Condensed Consolidated Cash Flow Statement

2015
000s
2014
000s




Cash flows from operating activities



Profit before taxation

2,072
777




Adjustment for:



Amortisation and depreciation

713
518
Loss/(gain) on disposal of fixed assets

4
(5)
Share-based payment charge

288
338
Acquisition of shares for non-cash consideration

(142)
-
Exchange adjustments

(252)
(208)
IPO costs

-
299
Acquisition costs

54
285
Investment revenues

(1)
-
Finance costs

1
2


Operating cash flow before changes in working capital and provisions

2,737
2,006




Increase in trade and other receivables

(2,897)
(1,993)
Increase in trade and other payables

1,012
954


Cash generated from operations

852
967




Taxation paid

(588)
(430)


Net cash inflow from operating activities

264
537


Investing activities



Investment revenues received

1
-
Acquisition of property, plant and equipment

(270)
(62)
Acquisition of intangible assets

(285)
(84)
Investment in joint venture and other investments

(1)
(40)
Acquisition of subsidiary including expenses of acquisition

(312)
(6,846)
Receipts from sale of property, plant and equipment

2
11


Net cash outflow from investing activities

(865)
(7,021)






Financing activities



Issue of new shares

-
11,000
Expenses of fundraising

-
(1,869)
Finance costs paid

(1)
(2)
Increase in borrowings

7
11
Repayment of borrowings

(7)
(30)


Net cash (outflow)/inflow from financing activities

(1)
9,110


Net (decrease)/increase in cash and cash equivalents

(602)
2,626




Cash and cash equivalents at start of the year

4,576
1,950


Cash and cash equivalents at end of year

3,974
4,576


ERGOMED PLC
NOTES TO THE UNAUDITED PRELIMINARY RESULTS
For the year ended 31 December 2015
1. BASIS OF PREPARATION
The unaudited preliminary results for the year ended 31 December 2015 were approved by the Board of Ergomed plc on 11th April 2016. The unaudited preliminary results do not constitute the statutory financial statements within the meaning of section 434 of the Companies Act 2006, but are an extract from the financial statements. They are based on, and are consistent with, that in the Group's statutory accounts for the year ended 31 December 2015 and those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Financial statements for the year ended 31 December 2014 have been delivered to the Registrar of Companies.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, as adopted by the European Union (EU) (IFRS), this announcement does not in itself contain sufficient information to comply with IFRS.
The audited statutory financial statements for the year ended 31 December 2015 are expected to be distributed to shareholders in May 2016 and will be available at the registered office of the Company, 26-28 Frederick Sanger Road, Surrey Research Park, Guildford, Surrey, GU2 7YD. Details can also be found on the Company's website at: www.ergomedplc.com.
GOING CONCERN
The unaudited preliminary results have been prepared on the going concern basis, which assumes that the Group will have sufficient funds to continue in operational existence for the foreseeable future, being a period of no less than 12 months from the expected date of signing of the financial statements in May 2016. This is based on the Directors having regard to the performance of the business, they have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The Group is financed by funds generated from profitable operations and equity.
The Directors have reviewed a cash flow forecast ("the Forecast") for the period ending 31 December 2017. The Forecast represents the Directors' best estimate of the Group's future performance and necessarily includes a number of assumptions, including the level of revenues. The Forecast demonstrates that the Directors have a reasonable expectation that the Group will be able to meet its liabilities as they fall due, for a period of at least 12 months from the date of approval of the financial statements.
On the basis of the above factors and, having made appropriate enquiries, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these unaudited preliminary results.
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following areas are those in which the Directors have made critical judgements and estimates in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the unaudited preliminary results.
Revenue recognition
The amount of revenue to be recognised is based on, inter alia, management's estimate of the fair value of the consideration received or receivable, the stage of completion and of the point in time at which management considers that it becomes probable that economic benefits will flow to the entity (as the outcome is not always certain at the inception of a contract).
Impairment of Goodwill
Under IFRS, goodwill is reviewed for impairment at least annually. Determining whether goodwill is impaired requires an estimation of the recoverable amount of the cash-generating units to which goodwill has been allocated. The calculation of the recoverable amount requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to determine whether the recoverable amount is greater than the carrying value.
Bad debt provision
In determining the level of provisioning for bad debts, the Directors have considered the aging of trade receivables, and the payment history and financial position of debtors. They have made a provision of 234,000 against trade receivables.
Exceptional items
During the year, the company incurred costs related to the establishment of an office in Taiwan and various M&A activities. The Board considers these to be non-recurring in nature and presents them separately as exceptional items. These are detailed in note 3.
2. OPERATING SEGMENTS
Products and services from which reportable segments derive their revenues
The Directors are of the opinion that the Group operates as two business segments; clinical research services ("CRS") and drug safety and medical information services ("DS&MI"). The business segment, DS&MI relates to the results of PrimeVigilance and Sound Opinion following their respective acquisitions by the Company on 15 July 2014 and 26 May 2015.
Geographical information
The Group's revenue from external customers by geographical location is detailed below:
2015
Revenue from external customers

CRS
000s
DS&MI
000s
Total
000s




UK
2,748
3,395
6,143
Europe, Middle East and Africa
9,407
2,878
12,285
North America
7,945
1,874
9,819
Asia
1,806
3
1,809
Australia
-
122
122


21,906
8,272
30,178



2014
Revenue from external customers

CRS
000s
DS&MI
000s
Total
000s




UK
2,744
1,097
3,841
Europe, Middle East and Africa
8,478
1,113
9,591
North America
5,856
855
6,711
Asia
984
-
984
Australia
-
28
28


18,062
3,093
21,155

2015
CRS
000s
DS&MI
000s
Eliminations
000s
Consolidated
Total
000s





Revenue




Third party sales
21,906
8,272
-
30,178
Intersegment sales and recharges
67
9
(76)
-

Total revenue
21,973
8,281
(76)
30,178

2014
CRS
000s
DS&MI
000s
Eliminations
000s
Consolidated
Total
000s





Revenue




Third party sales
18,062
3,093
-
21,155
Intersegment sales and recharges
38
-
(38)
-

Total revenue
18,100
3,093
(38)
21,155

Information about major customers
In 2015, the Group had two customers that contributed 10% or more to the Group's revenue. Revenues of approximately 5,219,000 and 5,181,000 were recognised from these customers respectively for clinical research services.
In 2014, the Group had three customers that contributed 10% or more to the Group's revenue. Revenues of approximately 4,370,000, 2,982,000 and 2,673,000 were recognised from these customers respectively.
3. EXCEPTIONAL ITEMS

2015
000s
2014
000s



Establishment of Taiwan office
37
-
Acquisition of Sound Opinion Limited (note 6)
54
-
Other M&A activities
218
-
Expenses in relation to IPO
-
299
Expenses in relation to acquisition of PrimeVigilance
-
285 


309
584 

4. TAXATION

2015
000s
2014
000s
Current tax


UK corporation tax charge for the year
349
109
Overseas corporation tax
308
147
Adjustment in respect of prior years
13
(3)

Current tax charge
670
253



Deferred tax


Origination and reversal of timing differences
(143)
(51)
Effect of changes in tax rates
(7)
(3)

Tax on profit
520
199

In addition to the amounts charged to the income statement and other comprehensive income, the following amounts have been recognised directly in equity:

2015
000s
2014
000s



Deferred tax


Change in estimated excess tax deductions related to share-based payments
(1)
(298)

Total income tax credit recognised directly in equity
(1)
(298)

5. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:

2015
'000
 2014
'000
Earnings for the purposes of basic earnings per share being net profit attributable to owners of the Company
1,552
578
Effect of dilutive potential ordinary shares
-
-

Earnings for the purposes of diluted earnings per share
1,552
578





2015
No.
2014
No.
Number of shares


Weighted average number of ordinary shares for the purposes of basic earnings per share
28,750,000
24,075,342
Effect of dilutive potential ordinary shares


Share options
1,015,223
993,600

Weighted average number of ordinary shares for the purposes of diluted earnings per share
29,765,223
25,068,942

6. ACQUISITION OF SUBSIDIARY - SOUND OPINION LIMITED
On 26 May 2015, Ergomed plc acquired 100 per cent of the issued share capital of Sound Opinion Limited, a leading provider of medical information services. Sound Opinion Limited was acquired in order to broaden the range of healthcare services provided by the business and to thereby increase the profitability of Ergomed plc.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.

Provisionalvaluation
Adjustments
Final valuation

'000s
'000s
'000s




Property, plant and equipment
2
-
2
Intangible assets
-
210
210

Total non-current assets
2
210
212

Trade and other debtors
36
-
36
Accrued income
4
-
4
Cash and equivalents
62
-
62

Currentassets
102
-
102

Trade and other creditors
(33)
-
(33)
Deferred revenue
(21)
-
(21)
Tax payable
(24)
-
(24)
Deferred tax
-
(42)
(42)

Financial liabilities
(78)
(42)
(120)

Total identifiable net assets
26
168
194




Goodwill
374
(168)
206

Total consideration
400
-
400





Satisfied by:



Cash
320
-
320
Deferred consideration
80
-
80

Total consideration
400
-
400

Net cash outflow arising on acquisition



Cash consideration
320
-
320
Less: cash and cash equivalent balances acquired
(62)
-
(62)


258
-
258

The fair value of the financial assets includes receivables with a fair value of 36,000 and a gross contractual value of 36,000. The best estimate at acquisition date of the contractual cash flows not to be collected is nil.
Goodwill is valued at 206,000 which arises from the excess of purchase price of 400,000 over net assets of 194,000. None of the goodwill is expected to be deductible for income tax purposes.
Sound Opinion contributed 211,000 revenue and 52,000 to the Group's profit for the period between the date of acquisition and the balance sheet date.
If the acquisition of Sound Opinion had been completed on the first day of the financial year, group revenues for the period would have been 155,000 higher and group profit would have been 45,000 higher.
Expenses incurred in relation to the acquisition of 54,000 have been charged as exceptional items in the Income Statement (note 3).
7. RELATED PARTY TRANSACTIONS
Ergomed d.o.o., a company registered in Croatia, is under the control of Miroslav Reljanovic, who is a Director and shareholder of the Company. During the year the Company and its subsidiaries were charged 160,000 (2014: 619,000) by Ergomed d.o.o. and its subsidiaries in respect of clinical research costs and other administration. At 31 December 2015 a balance of 66,000 was owed by the Company and its subsidiaries to Ergomed d.o.o. in respect of these costs (2014: 6,000). In addition, there was payment on account made to Ergomed d.o.o. of nil (2014: 14,000).
Chesyl Pharma Limited is a company owned by Rolf Stahel, who is a Director of the Company. During the year, the Company was charged consultancy fees of 54,000 (2014: 98,000) in relation to the services of Rolf Stahel. At 31 December 2015, amounts payable to Chesyl Pharma in relation to such consultancy services and associated expenses were 5,000 (2014: 5,000).
All transactions with related parties take place on an arm's length basis.
8. EBITDA
2015
2014
'000s
'000s



Operating profit
2,072
779
Adjust for:
Depreciation and amortisation charges within Administrative expenses
117
73
Amortisation of acquired intangible assets
596
446
Share-based payment charge
288
338
Exceptional items
309
584

EBITDA
3,382
2,220
Profit margin charged by related party
-
209

EBITDA (adjusted)
3,382
2,429
Results of PrimeVigilance for H1 2014
-
352

EBITDA (adjusted for PV acquisition)
3,382
2,781

9. Pro Forma Financial information - UNAUDITED AND UNREVIEWED
On 15 July 2014, Ergomed plc acquired the entire share capital of PrimeVigilance Limited. The following Pro Forma financial information for the year ended 31 December 2014 combines the financial results of Ergomed plc and PrimeVigilance Limited prior to that date for illustrative purposes. In addition, the results of Ergomed plc presented in this Pro Forma financial information are adjusted to remove the profit margin charged by a related party in relation to services provided to Ergomed plc, as such services have been provided from internal resources since the IPO. The Ergomed 2014 results in this Pro Forma financial information are also adjusted for the non-recurring IPO costs of 0.6m, a non-cash share option based payment charge of 0.3m and increased amortisation charge of 0.4m associated with the intangible assets associated with the two acquisitions of Ergomed Virtuoso and PrimeVigilance.
Pro Forma Consolidated Income Statement for the year ended 31 December 2014

12014
000s
2Pre-acquisition results of PrimeVigilance
000s
Pro Forma
2014
000s




REVENUE
21,155
2,539
23,694




Cost of sales
(15,245)
(1,646)
(16,891)

Gross profit
5,910
893
6,803




Administrative expenses
(3,535)
(543)
(4,078)
Depreciation expense
(73)
(18)
(91)
Other operating income
54
2
56

OPERATING PROFIT
2,356
334
2,690




Investment revenues
-
-
-
Finance costs
(2)
-
(2)

PROFIT BEFORE TAXATION
2,354
334
2,688




Taxation
(330)
(35)
(365)

PROFIT FOR THE YEAR
2,024
299
2,323





EBITDA (adjusted)
2,429
352
2,781

1The results of Ergomed plc for 2014 are adjusted to remove the profit margin on services provided by a related party, exceptional costs arising from the IPO and acquisition of PrimeVigilance, share-based payment charge and amortisation of acquired intangible assets.
2The results of PrimeVigilance for H1 2014, being the period prior to acquisition in 2014. 

This information is provided by RNS
The company news service from the London Stock Exchange
  END
FR IBMJTMBBBTPF